1
00:00:03,240 --> 00:00:06,560
Speaker 1: This is Bloomberg Surveillance. When you look at the way

2
00:00:06,600 --> 00:00:10,600
Speaker 1: governments operate today, there is not so much one global

3
00:00:10,720 --> 00:00:13,480
Speaker 1: order as a lot of regional orders. If we're looking

4
00:00:13,480 --> 00:00:15,400
Speaker 1: at a set cycle that's gonna be pretty shallow and

5
00:00:15,520 --> 00:00:17,960
Speaker 1: an a Japanate economy that's a big current account sort

6
00:00:18,000 --> 00:00:20,640
Speaker 1: plus the end could appreciate for a while for Europe.

7
00:00:21,040 --> 00:00:25,360
Speaker 1: I think we now are at zero interest rates for

8
00:00:25,400 --> 00:00:29,320
Speaker 1: the rest of this decade. Bloomberg Surveillance your link to

9
00:00:29,360 --> 00:00:33,720
Speaker 1: the world of economics, finance, and investment on Bloomberg Radio.

10
00:00:33,920 --> 00:00:37,120
Speaker 1: Good morning everyone, Bloomberg Surveillance and Michael McKee is off

11
00:00:37,120 --> 00:00:39,199
Speaker 1: off off today friends and Lacoa will join in a

12
00:00:39,240 --> 00:00:42,440
Speaker 1: moment from London. Thrilled to have you from London and

13
00:00:42,600 --> 00:00:45,400
Speaker 1: Europe and worldwide as well. Much to talk about. Howard

14
00:00:45,400 --> 00:00:47,120
Speaker 1: Ward will be with us, one of our most popular

15
00:00:47,440 --> 00:00:50,720
Speaker 1: at guests. We will dive into use of cash in

16
00:00:50,840 --> 00:00:56,160
Speaker 1: belief in equities in a low nominal GDP environment, Just

17
00:00:56,320 --> 00:00:58,520
Speaker 1: sell everything, go to cash. I've been in the double

18
00:00:58,600 --> 00:01:01,560
Speaker 1: leverage all cash fund for three years. That's worked out

19
00:01:02,240 --> 00:01:07,120
Speaker 1: really really well. I'm kidding, It's like four winks a

20
00:01:07,200 --> 00:01:10,480
Speaker 1: train Wreckord Bloomberg surveillance brought you by Investco to the

21
00:01:10,520 --> 00:01:14,440
Speaker 1: day's headlines. Have you searching for more investment views. Investco's

22
00:01:14,520 --> 00:01:18,000
Speaker 1: experts can help find out the latest thought leadership at

23
00:01:18,040 --> 00:01:22,880
Speaker 1: the investco blog. Visit investco dot com slash us to

24
00:01:22,959 --> 00:01:25,240
Speaker 1: subscribe futures of the weight to them here. Four day

25
00:01:25,240 --> 00:01:28,479
Speaker 1: work week. I guess like London is London of John

26
00:01:28,480 --> 00:01:31,960
Speaker 1: Tucker's London off Monday as well? I think so, I

27
00:01:32,720 --> 00:01:37,400
Speaker 1: do so. Howard work believes so? Yeah, today and tomorrow too. Yes,

28
00:01:37,440 --> 00:01:40,520
Speaker 1: we get GDP data tomorrow. We'll go into that. Uh

29
00:01:40,600 --> 00:01:45,120
Speaker 1: during our hours today futures get negative eleven now futures

30
00:01:45,120 --> 00:01:49,200
Speaker 1: negative eight, three dollars stronger, Euro one eleven sixty eight,

31
00:01:49,280 --> 00:01:54,400
Speaker 1: Yen one sixty five. Watching oil a thirty eight print

32
00:01:54,520 --> 00:01:56,280
Speaker 1: was a big deal an hour ago. We're through that

33
00:01:56,320 --> 00:02:03,120
Speaker 1: down cents four brent crude thirty nine, Uh fifty six

34
00:02:03,520 --> 00:02:07,200
Speaker 1: is well in London. Francy lacroise, Francy lovely to have

35
00:02:07,240 --> 00:02:09,679
Speaker 1: you joined us on a radio to this one to

36
00:02:09,680 --> 00:02:12,600
Speaker 1: give us a brexitst Brexit update? What is the Brexit

37
00:02:12,680 --> 00:02:16,120
Speaker 1: today and how does the debate get to next week

38
00:02:16,120 --> 00:02:19,000
Speaker 1: when you get back to work Tuesday? Yeah, I you

39
00:02:19,080 --> 00:02:21,040
Speaker 1: know what I don't know. I wish I knew, because

40
00:02:21,040 --> 00:02:23,720
Speaker 1: every day we have a new headline, and every day

41
00:02:23,760 --> 00:02:26,520
Speaker 1: there's one former this or one former of that at

42
00:02:26,560 --> 00:02:29,919
Speaker 1: saying how much we risk losing money or how much

43
00:02:29,960 --> 00:02:33,200
Speaker 1: we win losing money if we lose the EU. So, actually, Tom,

44
00:02:33,200 --> 00:02:36,240
Speaker 1: the problems that it's quite missy, and it's coming from

45
00:02:36,320 --> 00:02:40,679
Speaker 1: all angles of George Osborne, who's talking now to lawmakers,

46
00:02:40,680 --> 00:02:44,119
Speaker 1: and David Cameron, both really in hot water. Okay, let's

47
00:02:44,120 --> 00:02:46,240
Speaker 1: get to Howard Ward. He's a gamco and has been

48
00:02:46,280 --> 00:02:50,799
Speaker 1: an owner of quality stocks for years. If the revenue

49
00:02:50,840 --> 00:02:53,840
Speaker 1: line is saggy due to nominal g d P, do

50
00:02:53,880 --> 00:02:58,320
Speaker 1: you have confidence that the companies you own can adjust well? Tom,

51
00:02:58,360 --> 00:03:02,280
Speaker 1: of course, my companies tend to fall into the large

52
00:03:02,280 --> 00:03:06,880
Speaker 1: cap growth camp. And even though we've had a relatively

53
00:03:06,960 --> 00:03:09,440
Speaker 1: modest rate of earnings and profit growth in the last

54
00:03:09,520 --> 00:03:12,640
Speaker 1: three years, the portfolio of holdings that I have have

55
00:03:12,760 --> 00:03:16,800
Speaker 1: compounded their earnings for the last three years. They've compounded

56
00:03:16,840 --> 00:03:19,320
Speaker 1: their revenues at twelve percent for the last three years.

57
00:03:19,360 --> 00:03:22,120
Speaker 1: So I do believe that the stocks that I hold

58
00:03:22,160 --> 00:03:25,640
Speaker 1: on balance in the aggregate will continue to generate actually

59
00:03:25,680 --> 00:03:28,320
Speaker 1: double digit top line and bottom line growth. I mean

60
00:03:28,320 --> 00:03:31,000
Speaker 1: you see credit sueeze just as one example where basically

61
00:03:31,520 --> 00:03:35,520
Speaker 1: geditorialize their cutting to the bone in other industries. I

62
00:03:35,640 --> 00:03:38,960
Speaker 1: don't see that. Is that something to come where if

63
00:03:39,000 --> 00:03:43,960
Speaker 1: we have subpar sub far four percent nominal two real

64
00:03:44,040 --> 00:03:46,160
Speaker 1: GDP growth, that we start to see parts of credit

65
00:03:46,200 --> 00:03:47,920
Speaker 1: se know, this is a real hard time for the

66
00:03:48,280 --> 00:03:51,760
Speaker 1: difficult period for the banks. And I don't own any banks,

67
00:03:51,760 --> 00:03:54,520
Speaker 1: and in the again co Growth Fund, and I did

68
00:03:54,560 --> 00:03:57,360
Speaker 1: own some banks. I bought some banks, announced it on

69
00:03:57,440 --> 00:04:00,960
Speaker 1: your show and and UH two thousand and nine when

70
00:04:01,000 --> 00:04:05,040
Speaker 1: you could buy JP Morgan and Golden Sachs and Morgan

71
00:04:05,120 --> 00:04:08,160
Speaker 1: Stanley below tangible book value. You can do that again now,

72
00:04:08,200 --> 00:04:11,680
Speaker 1: but I'm not sure you want to because the situation

73
00:04:11,720 --> 00:04:17,039
Speaker 1: has changed. The recovery in banks has been clouded by UH,

74
00:04:17,120 --> 00:04:20,520
Speaker 1: the regulatory efforts to forcing the banks to raise capital,

75
00:04:20,600 --> 00:04:23,799
Speaker 1: making the banks more reluctant to lend you than they're

76
00:04:23,920 --> 00:04:27,080
Speaker 1: very much in a risk off mode of operation. And

77
00:04:27,120 --> 00:04:31,000
Speaker 1: there's this problem with the net interest margin, which isn't

78
00:04:31,000 --> 00:04:33,040
Speaker 1: going away. There was a lot, a lot of buying

79
00:04:33,040 --> 00:04:36,920
Speaker 1: in the financials last year in anticipation of four rate

80
00:04:37,000 --> 00:04:40,360
Speaker 1: hikes this year. That's not happening. Uh, you haven't had

81
00:04:40,480 --> 00:04:42,799
Speaker 1: an I P O and and over a hundred days.

82
00:04:42,839 --> 00:04:45,279
Speaker 1: Now that part of the business isn't doing very well

83
00:04:45,600 --> 00:04:47,440
Speaker 1: and M and A coming off of a record year

84
00:04:47,520 --> 00:04:50,800
Speaker 1: last year, is also up against very difficult compares. So

85
00:04:50,839 --> 00:04:53,120
Speaker 1: as we go into the first quarter earning season, you

86
00:04:53,160 --> 00:04:55,520
Speaker 1: can pretty much expect that virtually all the banks are

87
00:04:55,520 --> 00:04:59,240
Speaker 1: going to have negative earnings revisions after the Q one report,

88
00:04:59,600 --> 00:05:01,840
Speaker 1: especially Howard when you when you look at negative rates,

89
00:05:01,839 --> 00:05:05,360
Speaker 1: but you if I'm not mistaken like energy stocks, Now

90
00:05:05,520 --> 00:05:08,520
Speaker 1: that for me is a pretty brave call. Well, let's

91
00:05:08,560 --> 00:05:11,680
Speaker 1: put this in the context of a growth manager whose

92
00:05:11,680 --> 00:05:14,520
Speaker 1: index has a a one half of one percent weighting

93
00:05:14,520 --> 00:05:17,920
Speaker 1: and energy. I'm overweight energy, but my energy waiting is

94
00:05:18,000 --> 00:05:22,960
Speaker 1: one percent, So I'm not being terribly bold and and

95
00:05:23,320 --> 00:05:27,160
Speaker 1: we were, uh, you know, less than the index. Way

96
00:05:27,200 --> 00:05:29,560
Speaker 1: This sounds probably a little bit too cute for for

97
00:05:29,600 --> 00:05:32,720
Speaker 1: some people, but this is sort of what we institutional

98
00:05:32,760 --> 00:05:36,800
Speaker 1: investors are have to do to survive. Uh. We all

99
00:05:37,120 --> 00:05:39,560
Speaker 1: have gone from being an underweight the index to overweight

100
00:05:39,640 --> 00:05:44,000
Speaker 1: the index. I do, however, believe that over the course

101
00:05:44,120 --> 00:05:47,039
Speaker 1: of this year, while energy is going to back and fill.

102
00:05:47,120 --> 00:05:49,280
Speaker 1: And the role of the dollar is important here too

103
00:05:49,320 --> 00:05:52,480
Speaker 1: in terms of oil prices. But energy will be moving higher.

104
00:05:52,760 --> 00:05:54,960
Speaker 1: You cannot. I just do not not believe you can

105
00:05:54,960 --> 00:05:58,000
Speaker 1: have a seventy decline in the recount, which is what

106
00:05:58,040 --> 00:06:01,479
Speaker 1: we've had, and expect people to flip a switch and

107
00:06:01,760 --> 00:06:04,680
Speaker 1: to have their their oil production resume at the levels

108
00:06:04,720 --> 00:06:09,120
Speaker 1: that it was when we were much much higher. And

109
00:06:09,200 --> 00:06:11,760
Speaker 1: so I do think the price of crewe is going

110
00:06:11,800 --> 00:06:14,840
Speaker 1: to continue to snap back over the course of this

111
00:06:14,920 --> 00:06:17,240
Speaker 1: year to get to a level that can be sustained

112
00:06:17,560 --> 00:06:21,120
Speaker 1: in terms of generating enough production, not only to meet

113
00:06:21,240 --> 00:06:25,280
Speaker 1: the demand in oil, which is still rising at a

114
00:06:25,640 --> 00:06:28,440
Speaker 1: one percent or two percent rate globally, to offset the

115
00:06:28,480 --> 00:06:32,600
Speaker 1: five percent decline or depletion in the existing well production

116
00:06:32,960 --> 00:06:35,440
Speaker 1: that takes place every year. Howard. One of the things,

117
00:06:35,560 --> 00:06:37,920
Speaker 1: and I know Tom you're one a way in because

118
00:06:37,920 --> 00:06:41,160
Speaker 1: you always ask about consolidation in the banking sector. Are

119
00:06:41,200 --> 00:06:45,400
Speaker 1: we going to see European players being bought? Right? So,

120
00:06:45,400 --> 00:06:47,719
Speaker 1: so this is there's a little bit of consolidation. But

121
00:06:47,760 --> 00:06:50,320
Speaker 1: actually regulators around the world don't like it. They don't

122
00:06:50,360 --> 00:06:51,840
Speaker 1: like it if it's the banks, they don't like it

123
00:06:52,080 --> 00:06:54,920
Speaker 1: if it's energy. They don't like a full stop. Howard,

124
00:06:54,960 --> 00:06:56,960
Speaker 1: are we going to see when are we going to

125
00:06:56,960 --> 00:07:02,320
Speaker 1: see companies starting to use their cash to buy more comes? Well,

126
00:07:02,440 --> 00:07:06,920
Speaker 1: I mean it is happening, uh, to a degree. I'm

127
00:07:06,960 --> 00:07:10,640
Speaker 1: trying to remember, Um, just this week, I think we

128
00:07:10,680 --> 00:07:14,560
Speaker 1: sell an acquisition for cash. I'm having a hard time

129
00:07:14,560 --> 00:07:17,480
Speaker 1: recalling which company was. So I mean it is, it

130
00:07:17,680 --> 00:07:23,240
Speaker 1: is happening. Obviously, with interest rates this low, Uh, it's

131
00:07:23,400 --> 00:07:27,000
Speaker 1: very easy to buy company and pay almost any price.

132
00:07:27,080 --> 00:07:30,600
Speaker 1: And it's a creative to earnings. And so because you're

133
00:07:30,640 --> 00:07:32,800
Speaker 1: you're not earning anything on your cash, if you can

134
00:07:32,800 --> 00:07:36,080
Speaker 1: earn anything on the acquisition for you're paying for it

135
00:07:36,120 --> 00:07:38,840
Speaker 1: with cash, it's going to be a creative to your earnings.

136
00:07:38,920 --> 00:07:43,280
Speaker 1: And so it does happen, Um, And you know, certainly

137
00:07:43,680 --> 00:07:47,600
Speaker 1: the c suite, the decision makers are are a little

138
00:07:47,600 --> 00:07:51,480
Speaker 1: bit hesitant to commit capital right now because the global

139
00:07:51,520 --> 00:07:53,840
Speaker 1: headlines are not as as rosy as we would like

140
00:07:53,920 --> 00:07:56,240
Speaker 1: them to be. Howard, I have to jump in because

141
00:07:56,240 --> 00:07:58,320
Speaker 1: we're just getting a little bit of breaking news from

142
00:07:58,440 --> 00:08:01,240
Speaker 1: the Belgium a newsage and sees a bell got there

143
00:08:01,240 --> 00:08:06,160
Speaker 1: reporting now that Tom, there's a police operation underway in Brussels.

144
00:08:06,360 --> 00:08:09,440
Speaker 1: We've of course reached out to our various reporters on

145
00:08:09,480 --> 00:08:12,600
Speaker 1: the ground, our Brussels Bureautry. What he was saying was

146
00:08:12,640 --> 00:08:16,320
Speaker 1: that there were machine gun wielding soldiers but also guarded

147
00:08:16,520 --> 00:08:20,679
Speaker 1: a subway entrances, searching commuters bags as they entered the Metro.

148
00:08:20,840 --> 00:08:25,760
Speaker 1: Now we understand that there's some police operation underway. Again,

149
00:08:25,920 --> 00:08:29,240
Speaker 1: as far as we knew, there were two fugitive suspects

150
00:08:29,280 --> 00:08:31,120
Speaker 1: on the run, so the manhunt was on the run

151
00:08:31,120 --> 00:08:33,559
Speaker 1: and now there's a police operation underway in Brussels. All

152
00:08:33,559 --> 00:08:36,040
Speaker 1: too familiar from Paris only four months ago. If you're

153
00:08:36,040 --> 00:08:38,560
Speaker 1: just joining us, Francis LaQuan, London, I'm Tom Keenan New

154
00:08:38,600 --> 00:08:42,160
Speaker 1: York with Howard Ward of Gamco. Howard just because of time,

155
00:08:42,160 --> 00:08:44,000
Speaker 1: and you'll be with us for our next block as well.

156
00:08:44,160 --> 00:08:46,719
Speaker 1: Let's give Jeff, Jeff M l a victory lap when

157
00:08:46,760 --> 00:08:50,599
Speaker 1: you look at your new enthusiasm over General Electric is

158
00:08:50,679 --> 00:08:53,600
Speaker 1: part of this, Jeff? What took so long? Or is

159
00:08:53,600 --> 00:08:56,640
Speaker 1: this just how long it takes to transform a company? Yeah,

160
00:08:56,360 --> 00:08:59,000
Speaker 1: I uh, let me just go back just for one

161
00:08:59,040 --> 00:09:01,079
Speaker 1: second time. It was sure and Williams bowing vals Bar

162
00:09:01,160 --> 00:09:02,840
Speaker 1: for nine point three billion dollars in cash that was

163
00:09:02,840 --> 00:09:07,200
Speaker 1: announced this week. Jeff Immelt inherited his company UH on

164
00:09:07,360 --> 00:09:12,080
Speaker 1: just about nine eleven, and UH not a good time

165
00:09:12,120 --> 00:09:16,040
Speaker 1: to assume the the UH the top spot at GE

166
00:09:16,360 --> 00:09:20,040
Speaker 1: and in my opinion, he inherited a bit of a mess.

167
00:09:20,679 --> 00:09:24,319
Speaker 1: And UH not to say that Jeff Baby hasn't made

168
00:09:24,320 --> 00:09:27,120
Speaker 1: a mistake here or there, but I think he had

169
00:09:27,320 --> 00:09:30,680
Speaker 1: a a lot of heavy lifting to do to rearrange

170
00:09:30,720 --> 00:09:34,640
Speaker 1: the portfolio of general electrics businesses and I think after

171
00:09:34,760 --> 00:09:38,640
Speaker 1: fifteen years, he's finally got it where the street wants it,

172
00:09:38,720 --> 00:09:43,679
Speaker 1: which is back as a primarily industrial company providing global

173
00:09:43,679 --> 00:09:48,920
Speaker 1: infrastructure and UH shedding the risks and debt that goes

174
00:09:49,040 --> 00:09:51,640
Speaker 1: with being a big financial enterprise, which is what it

175
00:09:51,720 --> 00:09:54,200
Speaker 1: was with Kapp Howard Ward was us. I want to

176
00:09:54,200 --> 00:09:56,240
Speaker 1: come back and talk about something I get a lot

177
00:09:56,280 --> 00:09:59,240
Speaker 1: of mail on, which is the basic idea. You own

178
00:09:59,280 --> 00:10:02,720
Speaker 1: a company and you just own it because like Peter Lynch,

179
00:10:03,160 --> 00:10:06,040
Speaker 1: you know the product and you have to monitor it

180
00:10:06,160 --> 00:10:08,679
Speaker 1: through up and down. How do you do that? How

181
00:10:08,720 --> 00:10:11,880
Speaker 1: do you hold onto a Microsoft when they're imploding? Just

182
00:10:11,960 --> 00:10:15,800
Speaker 1: as one idea to get to where Microsoft clearly has

183
00:10:15,800 --> 00:10:18,520
Speaker 1: had a new day here in the last year or two.

184
00:10:18,520 --> 00:10:21,280
Speaker 1: It's wonderful to have Howard Ward here because short term

185
00:10:21,400 --> 00:10:23,720
Speaker 1: is like two years, which is a whole different view

186
00:10:24,160 --> 00:10:26,920
Speaker 1: from so much of what we uh here as well.

187
00:10:27,000 --> 00:10:30,280
Speaker 1: Futures negative eleven down, futures negative seventy seven. I just

188
00:10:30,320 --> 00:10:33,160
Speaker 1: put out the chart on West Texas Intermedia thirty eight

189
00:10:34,320 --> 00:10:36,680
Speaker 1: eighties six. Some'm real weight to oil in the last

190
00:10:37,280 --> 00:10:39,680
Speaker 1: two days. I put that out on Bloomberg Radio plus

191
00:10:40,120 --> 00:10:43,560
Speaker 1: dollars stronger in the ten year yield one point eight

192
00:10:43,600 --> 00:10:45,920
Speaker 1: seven percent the two year to four digits point eight

193
00:10:46,160 --> 00:10:51,920
Speaker 1: five six six on the two year. In this hour

194
00:10:52,080 --> 00:10:55,640
Speaker 1: of Bloomberg surveillance branched by Volvo Cars at White Planes.

195
00:10:56,320 --> 00:10:59,680
Speaker 1: Visit Volvo Cars White Planes dot Com with the news.

196
00:10:59,720 --> 00:11:02,200
Speaker 1: Here's Michael bar To thank you very much. Belgian and

197
00:11:02,320 --> 00:11:05,800
Speaker 1: French media report today that there may be two attackers

198
00:11:05,840 --> 00:11:09,719
Speaker 1: at large following the deadly Brussels attacks. In Brussels, the

199
00:11:09,760 --> 00:11:12,719
Speaker 1: chief suspect in last year's Paris attacks is due in

200
00:11:12,840 --> 00:11:16,440
Speaker 1: court today and EU ministers are holding an emergency meeting today.

201
00:11:16,920 --> 00:11:20,360
Speaker 1: Officials in Iraq say Operation Conquest, the campaign to take

202
00:11:20,440 --> 00:11:23,080
Speaker 1: back the northern city of Mosul from the Islamic State

203
00:11:23,120 --> 00:11:26,600
Speaker 1: group has finally begun. The Iraqi military effort is backed

204
00:11:26,600 --> 00:11:30,280
Speaker 1: by US led coalition aircraft. North Korea says it has

205
00:11:30,320 --> 00:11:33,880
Speaker 1: successfully conducted a high powered solid fuel rocket engine test.

206
00:11:34,320 --> 00:11:36,440
Speaker 1: If that's true, it would be a major step forward

207
00:11:36,480 --> 00:11:40,040
Speaker 1: and boosting its missile attack capability against South Korea and

208
00:11:40,240 --> 00:11:43,200
Speaker 1: the US. Global News twenty four hours a day, powered

209
00:11:43,200 --> 00:11:46,319
Speaker 1: by our two hundred journalists more than a hundred fifty

210
00:11:46,320 --> 00:11:49,520
Speaker 1: news bureaus from around the world. I'm Michael bar Tom

211
00:11:49,400 --> 00:11:54,439
Speaker 1: and Michael bar Thanks so much, h Sterling. Mr Possiborne

212
00:11:54,520 --> 00:11:58,960
Speaker 1: speaking today, Sterling sucky through the week. We're with Howard

213
00:11:59,000 --> 00:12:03,359
Speaker 1: Ward of gam Fenci Laqua, Tom Keen. This is Bloomberg Surveillance.

214
00:12:06,440 --> 00:12:08,760
Speaker 1: Bloomberg Surveillance brought to you by Flushing Bank. All but

215
00:12:08,840 --> 00:12:11,480
Speaker 1: a complete business checking account with fifteen thousand dollars more.

216
00:12:11,559 --> 00:12:14,559
Speaker 1: Get a free sixteen gig WiFi tablet is a Flushing

217
00:12:14,600 --> 00:12:18,400
Speaker 1: Bank to convert details remember fd I C Equal Housing Lender.

218
00:12:22,240 --> 00:12:25,640
Speaker 1: Global Business News twenty four hours a day at Bloomberg

219
00:12:25,679 --> 00:12:28,760
Speaker 1: dot com, the Radio plus mobile app and on your radio.

220
00:12:29,040 --> 00:12:33,000
Speaker 1: This is a Bloomberg Business flash and I'm camerin Moscow.

221
00:12:33,040 --> 00:12:35,960
Speaker 1: This updates brought to you by eisener Amper. When entrepreneurs

222
00:12:36,000 --> 00:12:39,400
Speaker 1: face challenges like choosing a business structure or access to capital,

223
00:12:39,679 --> 00:12:42,960
Speaker 1: they call the accountants and advisors at Eisner Amper connect

224
00:12:43,000 --> 00:12:46,800
Speaker 1: with them. Eisner Amper dot Com slash tech stocks dropping

225
00:12:46,880 --> 00:12:49,640
Speaker 1: around the world as the dollar extends, gains into a

226
00:12:49,679 --> 00:12:52,760
Speaker 1: fifth day with the potential for higher US interest rates again,

227
00:12:52,880 --> 00:12:56,440
Speaker 1: royal and financial markets as the easter vacation looms. We

228
00:12:56,520 --> 00:12:59,040
Speaker 1: checked the markets every fifteen minutes throughout the trading day.

229
00:12:59,080 --> 00:13:02,560
Speaker 1: On Bloomberg SNP eveny futures down eleven points this morning.

230
00:13:02,559 --> 00:13:05,440
Speaker 1: Dow E Mini Future is down eighty three. Na's documenty

231
00:13:05,520 --> 00:13:07,960
Speaker 1: Future is down twenty five. The decks in Germany's down

232
00:13:08,040 --> 00:13:10,920
Speaker 1: one point four percent ten. Your treasury of four thirty

233
00:13:10,960 --> 00:13:13,559
Speaker 1: seconds the yield one point eight six percent. Nom X

234
00:13:13,559 --> 00:13:16,040
Speaker 1: scret oil down two point four percent or ninety seven

235
00:13:16,040 --> 00:13:19,160
Speaker 1: cents to thirty eight two. A barrel Comics gold is

236
00:13:19,160 --> 00:13:21,360
Speaker 1: down four ten per cent or four dollars ninety cents.

237
00:13:21,360 --> 00:13:24,319
Speaker 1: At twelve twenty seventy announced the Euro at dollar eleven

238
00:13:24,400 --> 00:13:27,480
Speaker 1: sixty five the end one twelve point seven one. That's

239
00:13:27,480 --> 00:13:31,440
Speaker 1: a Bloomberg business flash. Tom and Francine Karen, thanks so much.

240
00:13:31,520 --> 00:13:33,840
Speaker 1: Francy Lakwin, London. I'm Tom Keenan New York and with

241
00:13:33,960 --> 00:13:38,040
Speaker 1: us Howard Ward, we talked about a lost decade, and

242
00:13:38,160 --> 00:13:41,440
Speaker 1: people on Japan will correct me and say, well, no, actually, Tom,

243
00:13:41,440 --> 00:13:45,320
Speaker 1: it's closer to two decades, pushing three, the lost decade

244
00:13:45,360 --> 00:13:49,440
Speaker 1: for Microsoft. I'm eyeball in the Howard Ward at thirteen years.

245
00:13:49,920 --> 00:13:51,920
Speaker 1: When does a smart like a guy like you go

246
00:13:52,040 --> 00:13:54,880
Speaker 1: along on Microsoft or did you hold it through that

247
00:13:55,000 --> 00:13:58,280
Speaker 1: horrific period? Now, Tom, actually we didn't hold it throughout

248
00:13:58,280 --> 00:14:01,960
Speaker 1: that entire period, um, but we did get back into

249
00:14:02,000 --> 00:14:04,840
Speaker 1: it around I think our average cost is around twenty

250
00:14:04,920 --> 00:14:08,400
Speaker 1: eight and it's one of our top five holdings. UM.

251
00:14:08,520 --> 00:14:12,280
Speaker 1: Microsoft has been an interesting study, you know there in

252
00:14:12,280 --> 00:14:15,439
Speaker 1: the software business. The software business is inherently profitable. That

253
00:14:15,520 --> 00:14:17,800
Speaker 1: throws off a lot of free cash. And they've had

254
00:14:17,840 --> 00:14:22,200
Speaker 1: a nine percent market share in personal computer operating systems

255
00:14:22,600 --> 00:14:27,359
Speaker 1: forever and that gives them a tremendous amount of flexibility.

256
00:14:27,400 --> 00:14:29,560
Speaker 1: And this is a company that even when it's stock price,

257
00:14:29,600 --> 00:14:32,400
Speaker 1: which I think was up maybe at sixty times forward

258
00:14:32,400 --> 00:14:35,720
Speaker 1: earnings during the dot com phase, even as the stock

259
00:14:35,760 --> 00:14:38,560
Speaker 1: price was being repriced in the aftermath of that, their

260
00:14:38,600 --> 00:14:42,240
Speaker 1: earnings and revenues continue to grow. The real problem that

261
00:14:42,280 --> 00:14:45,640
Speaker 1: Wall Street has had with Microsoft up until recently was

262
00:14:45,680 --> 00:14:48,360
Speaker 1: that it was not very happy with the results of

263
00:14:48,360 --> 00:14:54,080
Speaker 1: Steve Ballmer. The company's efforts and to move into consumer

264
00:14:54,120 --> 00:14:58,080
Speaker 1: oriented technology have not been profitable, and he had a

265
00:14:58,160 --> 00:15:02,440
Speaker 1: history of making very expensive acquisitions using cash, I might add,

266
00:15:03,240 --> 00:15:05,520
Speaker 1: which ended up in massive ride offs. And they actually

267
00:15:05,520 --> 00:15:06,920
Speaker 1: he made one just as he went out the door

268
00:15:06,960 --> 00:15:09,960
Speaker 1: with Nokia and once again another major ride off. So

269
00:15:10,160 --> 00:15:12,480
Speaker 1: you know, the things have rarely started to come together

270
00:15:12,600 --> 00:15:15,520
Speaker 1: for Microsoft since his departure and the installation of Sacha

271
00:15:15,600 --> 00:15:18,360
Speaker 1: Nadella as the new CEO and Francy and I should

272
00:15:18,360 --> 00:15:21,040
Speaker 1: point out I've caught Howard Ward out on Fifth Avenue

273
00:15:21,080 --> 00:15:23,400
Speaker 1: near fifty third Street through on a red brick through

274
00:15:23,440 --> 00:15:28,880
Speaker 1: the Microsoft Consumers window. I mean, if they wanted to

275
00:15:28,960 --> 00:15:31,840
Speaker 1: just completely out of the consumer business, I think the

276
00:15:31,840 --> 00:15:34,520
Speaker 1: stock would go even higher. You get a bigger multiple

277
00:15:34,560 --> 00:15:37,080
Speaker 1: on the stock. The enterprise business that they have is

278
00:15:37,160 --> 00:15:39,600
Speaker 1: truly golden right, But how are do you not worry

279
00:15:39,600 --> 00:15:42,160
Speaker 1: about regulators? I know I'm a little bit obsessed with

280
00:15:42,200 --> 00:15:45,240
Speaker 1: regulators at the moment, but Microsoft, bottom line, you are

281
00:15:45,320 --> 00:15:49,240
Speaker 1: so double so European making double the profits it did

282
00:15:49,320 --> 00:15:54,360
Speaker 1: when antitrust regulators targeted the software firm back in two thousand, right,

283
00:15:54,400 --> 00:15:57,320
Speaker 1: so they could come back, well they could, but of

284
00:15:57,360 --> 00:16:01,120
Speaker 1: course the goalposts are moving. That's moving to mobile devices,

285
00:16:01,440 --> 00:16:04,760
Speaker 1: and in mobile, the world of mobility, the Microsoft operating

286
00:16:04,760 --> 00:16:08,280
Speaker 1: system is not very present and so uh, you know

287
00:16:08,320 --> 00:16:12,880
Speaker 1: that's the world of Android and iOS by Apple. So uh,

288
00:16:12,920 --> 00:16:14,920
Speaker 1: I think it's too little too late to be trying

289
00:16:14,960 --> 00:16:19,120
Speaker 1: to come come back and make a ruckus about their

290
00:16:19,200 --> 00:16:23,400
Speaker 1: market share and personal computer operating systems. And you know,

291
00:16:23,440 --> 00:16:27,040
Speaker 1: the regulators just uh, particularly in Europe, they can't stand

292
00:16:27,160 --> 00:16:30,360
Speaker 1: these very successful American companies with their big market shares.

293
00:16:30,400 --> 00:16:33,120
Speaker 1: But you know, they have the products and they're that

294
00:16:33,240 --> 00:16:35,840
Speaker 1: they have the first mover advantage and they're hard to dislodge.

295
00:16:37,920 --> 00:16:41,440
Speaker 1: Is there a company now it's just so overpriced you're

296
00:16:41,600 --> 00:16:44,920
Speaker 1: dying to to buy it or to add shares, and

297
00:16:45,040 --> 00:16:47,360
Speaker 1: you can't. There's gotta be like you get out of

298
00:16:47,360 --> 00:16:49,640
Speaker 1: it every morning and says I just want to buy

299
00:16:49,800 --> 00:16:53,520
Speaker 1: like Wi International. I can't. Yeah, So Tom, I wish

300
00:16:53,560 --> 00:16:55,920
Speaker 1: I had owned Netflix last year, but I could never

301
00:16:56,040 --> 00:16:59,040
Speaker 1: justify the valuation on Netflix and it's too bad because

302
00:16:59,040 --> 00:17:01,080
Speaker 1: it was up on a hundred and ten percent last year.

303
00:17:01,280 --> 00:17:03,440
Speaker 1: I would have made my performance much. Does that meet

304
00:17:03,440 --> 00:17:07,400
Speaker 1: the Howard Ward attributes of big growth? Well, you see,

305
00:17:07,440 --> 00:17:10,040
Speaker 1: I have problems with it, and I have problems. My

306
00:17:10,040 --> 00:17:13,280
Speaker 1: biggest problem with it is the valuation. Simply cannot Even

307
00:17:13,320 --> 00:17:16,520
Speaker 1: though it's down about year to date this year, I

308
00:17:16,560 --> 00:17:19,520
Speaker 1: still cannot stomach the evaluation. I can't even come close

309
00:17:19,520 --> 00:17:21,479
Speaker 1: to it. And frankly, I think their business is going

310
00:17:21,480 --> 00:17:23,560
Speaker 1: to be under assault by all the other conferencing. Do

311
00:17:23,600 --> 00:17:26,240
Speaker 1: you have Netflix in the United Kingdom? I do, and

312
00:17:26,280 --> 00:17:28,199
Speaker 1: I can't find a good film on it exactly. I

313
00:17:28,240 --> 00:17:30,720
Speaker 1: just dropped I have two accounts. I have two accounts

314
00:17:30,760 --> 00:17:34,040
Speaker 1: and I just dropped them both. Yeah. Yeah, So that's

315
00:17:34,040 --> 00:17:36,960
Speaker 1: one now. The other thing is tom is uh. You know,

316
00:17:37,000 --> 00:17:39,880
Speaker 1: we've bought been a buyer of Palo Alto Networks, which

317
00:17:40,000 --> 00:17:42,760
Speaker 1: is the leading cybersecurity firm, so we do own a

318
00:17:42,760 --> 00:17:44,520
Speaker 1: little bit of that. We have a starter position and

319
00:17:44,520 --> 00:17:47,320
Speaker 1: that I think cybersecurity is gonna be a place with

320
00:17:47,440 --> 00:17:50,399
Speaker 1: a big tail wind behind it over the next ten years.

321
00:17:50,440 --> 00:17:52,560
Speaker 1: And I think that's the leading name, and that it's

322
00:17:52,600 --> 00:17:55,280
Speaker 1: an expensive stock. It's down a bit from where it was,

323
00:17:55,359 --> 00:17:57,720
Speaker 1: but I think that that is one area that investors

324
00:17:57,720 --> 00:18:00,840
Speaker 1: should focus on. What about Facebook, So we were, you know,

325
00:18:00,960 --> 00:18:05,760
Speaker 1: it was the most amazing company ever and then it

326
00:18:05,880 --> 00:18:07,960
Speaker 1: fell from the stars and now it's back up. And

327
00:18:08,040 --> 00:18:10,440
Speaker 1: this is really because of strategy. They're strong and mobile,

328
00:18:10,800 --> 00:18:15,560
Speaker 1: but they've also made some acquisitions that make them look smart. Howard, Yeah, actually,

329
00:18:15,560 --> 00:18:18,480
Speaker 1: you know, and Facebook is one of our top five holdings. Uh.

330
00:18:18,760 --> 00:18:22,720
Speaker 1: Facebook's valuation is close to about one time it's growth

331
00:18:22,840 --> 00:18:27,480
Speaker 1: rate of around in terms of its forward pe and uh,

332
00:18:27,520 --> 00:18:32,240
Speaker 1: they are just minting money with mobile and uh. Yes,

333
00:18:32,320 --> 00:18:34,320
Speaker 1: the stock pulled back with the overall market, and it

334
00:18:34,440 --> 00:18:36,720
Speaker 1: pulled back with the rotation out of the so called

335
00:18:36,760 --> 00:18:39,359
Speaker 1: fang stocks, but it actually held up better than a

336
00:18:39,400 --> 00:18:44,000
Speaker 1: lot of names. And we see nothing but actually very

337
00:18:44,000 --> 00:18:47,560
Speaker 1: strong results for them this year. Google and Facebook are

338
00:18:47,640 --> 00:18:51,040
Speaker 1: vacuuming up virtually all of the advertising dollars that are

339
00:18:51,440 --> 00:18:55,000
Speaker 1: moving or migrating from old media to new media. Those

340
00:18:55,000 --> 00:18:58,240
Speaker 1: two companies are really in the caparate seat. Hard word,

341
00:18:58,320 --> 00:19:01,520
Speaker 1: thank you so much, Thank you having it's always just brilliant.

342
00:19:01,520 --> 00:19:04,120
Speaker 1: We got to get you in more often, Mr Ward

343
00:19:04,200 --> 00:19:06,679
Speaker 1: at gam Co. And of course you heard him on

344
00:19:06,680 --> 00:19:09,680
Speaker 1: a number of growth stocks. At growth stock, folks, is

345
00:19:11,160 --> 00:19:14,959
Speaker 1: something that's done better than good over the years. How

346
00:19:15,000 --> 00:19:18,359
Speaker 1: do you define value trap quickly? Uh? Well, value It

347
00:19:18,400 --> 00:19:22,600
Speaker 1: would be a value trap's credit suite of value. The

348
00:19:22,640 --> 00:19:25,920
Speaker 1: problem with the the banks look cheap at where is

349
00:19:25,960 --> 00:19:29,199
Speaker 1: the growth exactly? There really is no growth And in

350
00:19:29,240 --> 00:19:32,560
Speaker 1: the bottom line is earnings do drive share prices over time.

351
00:19:32,600 --> 00:19:35,520
Speaker 1: So if you don't have an earnings growth trajectory, don't

352
00:19:35,520 --> 00:19:37,119
Speaker 1: look for your stock fights to do. It's tough to

353
00:19:37,119 --> 00:19:38,639
Speaker 1: do a hard word with the gam cop with a

354
00:19:38,720 --> 00:19:41,840
Speaker 1: final thought on the value trap of the moment. Our

355
00:19:42,560 --> 00:19:45,080
Speaker 1: final thought here, at least for the moment, is a

356
00:19:45,119 --> 00:19:48,240
Speaker 1: little bit of tape. Deterioration has been very quiet the

357
00:19:48,320 --> 00:19:50,960
Speaker 1: last number of days. Oil done eighty nine cents thirty

358
00:19:50,960 --> 00:19:54,080
Speaker 1: eight eighty nine, Brent crude a little spread widening thirty

359
00:19:54,160 --> 00:19:59,879
Speaker 1: nine sixty Gold done five the ounce. Francy Lakwan London

360
00:20:00,119 --> 00:20:06,440
Speaker 1: Time keenan New York Bloomberg Surveillance Stay with us and

361
00:20:06,520 --> 00:20:09,359
Speaker 1: Bloomberg Surveillance being brought to you by New York Community Trust,

362
00:20:09,359 --> 00:20:13,160
Speaker 1: where donors like you help them make New York better.

363
00:20:13,840 --> 00:20:20,200
Speaker 1: You're listening to Bloomberg surveillance h